A five-year bond with a yield of 11% (continuously compounded) pays an 8% coupon at the end

Question:

A five-year bond with a yield of 11% (continuously compounded) pays an 8% coupon at the end of each year.

a. What is the bond's price?

b. What is the bond's duration?

c. Use the duration to calculate the effect on the bond's price of a 0.2% decrease in its yield.

d. Recalculate the bond's price on the basis of a 10.8% per annum yield and verify that the result is in agreement with your answer to (c).

Fantastic news! We've Found the answer you've been seeking!

Step by Step Answer:

Related Book For book-img-for-question

Options Futures And Other Derivatives

ISBN: 9780130090560

5th Edition

Authors: John C. Hull

See More Books

Question Posted: Oct 18, 2024 07:02 AM

See More Questions

I need the following solution calculated in an excel worksheet. please see attached problems and solutions Problem 4.8. The cash prices of six-month and one-year Treasury bills are 94.0 and 89.0. A...
1-Calculate amount of secondary compression in terms of inches 10 years following end of the primary consolidation. S.sc ang (12)= Coefficient of secondary compression=0.035 Thickness of clay layer-...
The owner of Firewood To Go is considering buying a hydraulic wood splitter which sells for $50,000. He figures it will cost an additional $100 per cord to purchase and split wood with this machine,...
A 2.0 kg lunchbox is sent sliding over a frictionless surface, in the positive direction of an x axis along the surface. Beginning at time t = 0, a steady wind pushes on the lunchbox in the negative...
A five-year bond with a yield of 11% (continuously compounded) pays an 8% coupon at the end of each year. a. What is the bond's price? b. What is the bond's duration? c. Use the duration to calculate...
Long-Term Contract with Interim Loss On March 1, 2010, Pechstein Construction Company contracted to construct a factory building for Fabrik Manufacturing Inc. for a total contract price of...
Q5: (A=3, C=2) Rank Major Salary 1 Fine & Applied Arts $35 539 2 Humanities $38 696 3 Theology & Religious $39 333 Vocations 4 Kinesiology/Recreation/ $39 779 Phys-Ed Architecture & Landscape 5 $40...
Suppose that the nine-month LIBOR interest rate is 8% per annum and the six-month LIBOR interest rate is 7.5% per annum (both with continuous compounding). Estimate the three-month Eurodollar futures...
Suppose that a bond portfolio with a duration of 12 years is hedged using a futures contract in which the underlying asset has a duration of four years. What is likely to be the impact on the hedge...
7.2 What operating budget exists for manufacturing but not for a retail company?
2. (10 points) Note: This is a great opportunity to use the market conventions we dis- cussed in class. You find the quotes for the T-bills that mature 6 months and one year from today on the WSJ...
WZY processing company uses 2,400 units of a product per year on a continuous basis. The product carrying costs are RM60 per year and ordering costs are RM252.05 per order. It takes 20 days to...
Question Berger Paint Pakistan limited produces three types of joint products, S ilver paint, G olden paint and D iamond paint. During March, 2020, the following information was recorded :...
Ahmed Manufacturing LLC manufactures Product Q. In the previous month of September 2020, the company budgeted to manufacture and sell 3,300 Product Q at a variable cost of OMR74 per unit and total...
Table 8.4 The Furniture Super Mart is a furniture retailer in Evansville, Indiana. The Marketing Manager wants to prepare a media budget based on the next quarter's business plan. The manager wants...
A conductor suspended by two flexible wires as shown in Figure P29.14 has a mass per unit length of 0.040 0 kg/m. What current must exist in the conductor in order for the tension in the supporting...
Identify the tax issues or problems suggested by the following situations. State each issue as a question. Jennifer did not file a tax return for 2007 because she honestly believed that no tax was...

A five-year bond with a yield of 11% (continuously compounded) pays an 8% coupon at the end

Question:

Step by Step Answer:

Options Futures And Other Derivatives

Students also viewed these Business questions